Thursday, October 26, 2006

Do labor shortages indicate a strong labor market?

Sorry I haven’t blogged in so long. Lack of ideas, mostly. Plus I’m busy not having ideas on my day job.

Today I have an idea. A lot of anecdotal evidence seems to suggest that labor shortages are a problem in the US today. Yet statistics – note, particularly, help wanted advertising, which is near a 50-year low – show little evidence of strong labor demand. Is this inconsistent?

I don’t think so. If different kinds of labor are complements in production, then shortages of certain kinds of labor could actually make the overall labor market weaker. For example, if individuals with a lot of different skills are required to make a product, then a shortage of one of those skills will depress demand for all the other skills. If chefs are in short supply, the demand for waiters will go down. Is this the kind of thing that’s happening in the US today? It seems plausible to me that shortages of certain technical and managerial skills could be depressing overall labor demand. Just an idea.

15 Comments:

This happened in the town I live. A few months ago, a plant opened and needed 500 workers. Only 300 were filled. In that month, the unemployment rate was 5.2% - this rate didn't sound like severe labor shortage, not to mention that there were two firms moved out of town a couple of years ago, one to Mexico, the other to Brazil.

It turned out that there were applicants for the rest of the openings, but they failed to pass either the background check or drug-free test.

Sorry that my comment does not follow your reasoning. But at least it is one reason for the shortage. I hope it is not common.

At the risk of point out the obvious, the current international financial landscape means that all manufacturing investment by American companies tends to be directed to China.

Any company considering building a next generation plant, builds it in China.

The only exceptions are cases in which a particular resource is NOT available in China. There are a variety of esoteric production processes and products readily available in the U.S., but not available in China.

The economies associated with investing in manufacturing plant in China are actually fairly modest, because of deficiencies in Chinese infrastructure and the lack of depth in Chinese manufacturing, which leaves China without some of these esoteric processes/skills.

Long-term interest rates are depressed by the international flow of funds, but returns on investment are depressed even more, by the combination of exchange rates and a determination of a reactionary Republican Administration to extract as much income and wealth from the poor and middle class as possible.

The only shortages I see are in low level and entry level work because the minimum wage has not been raised for so long no one is willing to work for it anymore and many would rather just drop out of the labor force. This could be creating a lack of jobs for higher level managerial workers that then remain out of the labor force, but most managerial workers aren't much more than minimum wage either and frequently less since they aren't hourly. Low pay is driving people out of the labor force and lowering the unemployment rate and lack of increase in real wages is keeping them there.

I meet a lot of different busienss leaders as I go around the country giving speeches. There really are "shortages" in the labor market. Not all across the country--Michigan and other midwest states still have plenty of people looking for work. But in most of the rest of the country, business people tell me it's hard to hire.

Key industries where it's hard to hire: trucking, health care, financial services. I was hearing about construction labor shortages, but that's probably turning around now. I've spoken to several business managers who have told me that if a person with minimal qualifications walked in to apply for a job, they'd hire him or her on the spot.

Does that lead to weak markets for compelmentary labor? Theoretically yes, and it's probably true in some cases where the need is a very specific technical skill that's not quickly learned. But for many jobs, companies are taking a gamble with people they otherwise would not hire. This means the jobs are substitutes, rather than complements.

As for wages, I think that business managers are nervous about the commitment implicit in a higher rate of pay. The would rather risk underproduction at the peak than overly high salary expense at the next trough.

The industries that Bill suggests are consistent with what I’ve been hearing. I would argue that those industries are complementary with other industries. For example, if you can’t get your goods delivered (trucking), then there isn’t much point in increasing production, even if labor in your own industry is plentiful. I’m not sure how much substitutability of labor there is between industries, maybe more in the long run than in the short run. (At least you can’t hire unemployed auto workers to be nurses or financial analysts.)

Trucking has long hours and relatively low pay, but then it doesn't take much skill. Why would they not be willing to increase pay? Worried about competition from the post office? ;-)

Healthcare and finance require some education and skill and can, although not necessarily do, pay better, but where is the evidence of pay rising in these areas? If it isn't rising, then most likely their is no shortage. Accounting is the only area I know of rising.

Faint hint of the love of friendship. There is a friend, I think that is a cheap wow gold kind of love and friendship between the feelings between, you will occasionally miss a time to silence him, reminds him, the warm heart, a beautiful, a moving. Sad and worried at the time, you will think of him, you hope that he can in your side, give you comfort and buy wow power leveling understanding to you, and you never talk to him, are you afraid of their own grief that would preclude him from peaceful life.

You will be a song, a color, think of him, think of my wow gold his sincerity, he reminds me of the dedication, his mind had gone through the ups and downs together. With such a friend, you will treasure their lives and love their own lives, because you know I hope you had a good, he would like you to take care of themselves properly, and then to meet, he cheapest wow power leveling would like you to tell him you very happy.

That the concept of secularism, in your mind, because his replica replica rolex presence has become pale and weak, you are only in the depths of the bottom of my heart for this man set up a small space, stick with that quietly happy memories, from the the very beginning you know that you will not have any love, it seems that talk about love on the desecration CHEAP wow power level of this emotion, this can only be a friendship. This is how in the end all about? You want to for many years, but no clue.

You seldom have contacts in this long life, you meet the door may be only a few of the ten thousandth time, but in each other's hearts retain a miss, one asked, even if he went to the ends of the earth, even after many, many years, even BUY power leveling when the meet again, has long been a non-object is not, you still remember back as a profound, and this has been sufficient.

Sometimes life will calm a dry, maybe you will fall into the dry I replica rolex replica did this, perhaps what you do not have love, perhaps early HUAFA, full sideburns pale, but with such a friend, in the your life will ripple slightly, a little color, do you think of him. He remembered the quiet, perhaps the Health and cheap lotro gold the WHO will not forget.

Am grateful for you in this world, there is such a person, he is replica rolex not around you, he did not do anything for you, but you hope that he would have been very good, long life, happiness well-being ... ...

Am glad you had a feeling like that, pure and long, in this complex CHEAPEST power leveling world, there are such a friend, it is worth to cheap rs gold lbless you to miss ... ...